
Budget 2016: A big test for Osborne
“Normally, the budget is its own backdrop,” a cabinet member has been quoted as saying. “But this time there is something bigger going on.”
Indeed, it’s hard to recall a Budget in recent years so entrenched in political and economic turmoil. With the daggers from both sides in the EU Referendum debate very much about, many Eurosceptics are pre-empting George Osborne using Wednesday’s showpiece as a political game – if not in a bid to directly undermine those campaigning for Brexit, then at least as a means to discredit his main rival Boris Johnson.
Conservative infighting and the raging Europe debate aside, the Chancellor has also been outspoken in the build-up about the current uncertainty within the global economy, and re-iterated his intention to address the deficit in the short-term with further spending cuts. Yet it is agonisingly at odds with his burning desire to occupy the political centre ground, and also the proposed Labour economic manifesto of ‘spending to save’ compiled by John McDonnell.
Either way, there remains a degree of mystery as to where Osborne plans to find the £4 billion in savings he is seeking. We’ve highlighted a couple of areas which are under threat from the axe…
Disability benefit
It now appears almost certain that disability benefit will be cut, with the Chancellor stating on the Andrew Marr Show that the benefit “needs to be managed properly so the money goes to the people who need it most.” In fact, Government announced last week that it plans to cut £1.2 billion in disability benefit for nearly 650,000 people by 2020. Yet with Iain Duncan Smith’s controversial ‘fit-for-work’ assessments still fresh in the mind of many, the disabled seems, from a political point of view, to be a high-risk demographic to target for Tory cuts.
Pension tax relief
Until a week ago, it had seemed almost certain that Osborne would be looking to boost the coffers with a raid on pension tax relief for high earners – either via a flat-rate level of relief for all savers of around 30%, or indeed limiting relief on contributions to the 20% that is currently enjoyed by basic-rate taxpayers. However, uproar from the backbenches appears to have stopped such a plan – which undoubtedly would have been a money spinner for the Treasury – very much in its tracks. So will pensions be spared? This time around, perhaps. But one can’t help but feel that pensions will have an X on their back for the duration of this parliament.
Fuel duty
The plunge in oil prices is generally good for the consumer, but the Treasury – whose tax revenues come at a percentage rate – effectively lose out. It may be an unpopular target, but given that fuel duty has been frozen for a number of years and the downward curve in oil price, raising taxes may well be a decision Osborne feels he can justify.
What else can we expect?
If fuel duty is left alone, it is expected that motor insurance and road tax will be targeted. In addition, rumours of an increase in taxation on home insurance and even sin tax are rife, while some believe the Chancellor may consolidate his plans to take more revenues from the banks in the wake of the new surcharge he unveiled at last year’s Summer Budget. A popular decision with the public, perhaps, but it’s fair to assume there will be a backlash from the powerful banking sector should he go down this route.
On the other side of the coin, the possibility exists that the amount earned before higher-rate tax is paid may be increased significantly from its current £42,385. Wednesday should also present the opportunity for more detailed information and clarification on the implementation of the incoming National Living Wage, increased stamp duty on second homes, Help to Save and perhaps even the Innovative Finance ISA.
No doubt there will be a typical rabbit to emerge from Osborne’s red briefcase at some point too, but it’s hard to shake the feeling that this won’t be a Budget characterised by appeasing sweeteners. Certainly, it was our feeling that his claim of a ‘new-found £27 billion to spend’ at the Autumn Statement was dubious, so - counterintuitively perhaps - it would surely be in his interests for Wednesday’s address to be something of a non-event.
Indeed, the Chancellor may do well to heed his own advice, and not tamper with the status quo too much. True, his rivals and opponents will be circling as they look to poke holes and oblige their own agendas. But with Britain’s future as ostensibly uncertain as Osborne himself articulates, this is no time for radical reform. If the axe must fall, may it be discreetly, but rather than being a platform for political games, may this be a Budget that alleviates some of the unnerving discontent already facing savers and investors.
Main image 'George Osborne' by Altogetherfool. Image subject to copyright. A link to the image and appropriate licence can be found here. You must not use or reproduce this image other than in accordance with the licence.
Related articles:
- The EU referendum debate and us
- Your updated guide to Innovative Finance ISAs
- The experts' view of our economy in 2016
Get email updates for future blogs:
Our website offers information about saving, investing, tax and other financial matters, but not personal advice. If you're not sure whether peer-to-peer lending is right for you, please seek independent financial advice, and if you decide to invest with Lending Works, please read our Key Lender Information PDF first.
- Summary of a post.
- Summary of a post.
- Summary of a post.
In line with our risk management framework, today we published our Q4 2019 performance update.
As a platform, we take great pride in all that we've achieved since opening our doors for business nearly six years ago. We’ve
Featured
Wednesday’s Budget speech, coupled with the cut to Bank of England rates, represented a decisive response to the coronavirus. Here we analyse the impact it will have on mitigating disruption from Covid-19, along with the long-term implications of this significant fiscal stimulus.
Rumblings from the Treasury ahead of next week's Budget suggest tax grabs will be needed to fund increased spending, and it appears UK enterprise could be in the firing line. Here we articulate why targeting entrepreneurs and small business is ill advised.
In a difficult climate, customer acquisition and lead generation present stern challenges for UK retailers, and a great deal of marketing spend invariably gets directed towards getting feet through the door.
There is a variety of literature and research illustrating the importance of building brand loyalty, albeit with some degree of variance.
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The idea of peer-to-peer (P2P) lending is a simple one; you lend money to those who wish to borrow, with a view to receiving a great return for doing so.
Most popular
- Summary of a post.
The 2019-20 ISA season has been a damp squib, with banks disinterested in attracting savers’ cash, rates cut, and the stock market in freefall. However, the emergence of the IFISA means alternatives beckon for those seeking a stable middle ground in terms of risk and reward.
In a decade of slow recovery, the rapid rise in asset prices has been the standout. But how sustainable has price growth been, and could we be in the midst of a bubble?
- Summary of a post.
Most people consider income tax to be a given, but in the UK it is barely two centuries old. In this article, we look at how this tax has developed over the years, and also why it is set to remain at the core of our tax system for many decades to come.
Open banking celebrated its second birthday last month, but has the ‘revolution for financial services’ that was promised actually come to pass? In this article, we look at the progress the initiative has made so far, and what the future holds in the face of high levels of scepticism.